Legal HR Compliance

The Human Resources Division also needs to be aware of the laws prevalent in the country under which they recruit people. Key laws that a HR professional who chooses to operate in the field of retail need to be familiar include:

Payment of Bonus Act:

The Payment of Bonus Act, 1985 was framed with the objective of providing statutory obligations for payment of bonus to persons employed in certain establishments, on the basis of profits or productivity.

It is applicable all over India, to factories under the Factories Act to establishments employing 20 or more persons on any day during a year. The government may extend its coverage to establishments employing between 10 and 20 workers and covers all workers including supervisors and managers and administrators, technical and clerical staff employed on salary or wages not exceeding Rs 2500/- per month.

The main provisions include defining the eligibility for bonus, the payment of minimum and maximum bonus, the time limit for payment of bonus, the deductions form bonus, the computation of gross profits n available allocable surplus and the rights of employees.

Payment of Gratuity Act, 1972

The Act applies to every factory, mine, oilfield, plantation , port, railways company or to every sop or established in which 10 or more people are employed on any day into preceding 12 months or such other establishment or class of establishment in which 10 or more people are employed or were employed on any day in the preceding 12 months. It is applicable to employees drawing wages not exceeding Rs 3,500 per month.

The benefits include payment of 15 days wages for every completed year of service or part thereof in excess of six months, subject to a maximum of Rs 50,000/-.

Employees Provident Fund Act

The objectives of the Act are to make provisions of the future of the industrial worker after he retires or for his dependents in the case of his early death.

It scope and coverage includes factories ad establishments employing 20 or more persons and can be made applicable by the central government to establishments employing les than 20 persons or if the majority of employees agree.

It excludes establishments employing 50 or more persons or 20 or more persons but less than 50 persons until the expiry of three years in the case of the former and five years in the case of the latter; from the date of setting up of the establishment.

It is applicable to all persons who are employed directly or indirectly through contractors in any kind of work. Employees drawing pay not exceeding Rs 3500/- per month are eligible to be covered under this act.

The Employees State Insurance Act:

The objective of this Act is to provide for health cover, medical care and benefits for sickness, maternity employment injury, and pensions to dependents in case of death (or) employment injury. Employees drawing wages not exceeding Rs 3000/- per month are eligible to be covered under this Act.

The benefits include compensation for death ranging from a minimum of Rs 20,000 to a maximum of Rs 114,000. Compensation for permanent disablement ranges between Rs 24,000 and Rs 70,000. In case of temporary disablement, the employee is entitled to 50% of wages for a maximum period of 5 years.

The Minimum wages Act, 1948:

The objective of this act is to determine the minimum wages in the industry and trade where labor organizations are non-existent or ineffective.

It is applicable to all employees engaged to do any work skilled unskilled manual or clerical in scheduled employment including out workers. The main provisions include fixation of minimum wage of employees, the obligation of employees and the rights of workers.

The Trade Union Act, 1926:

This Act aims to confer a legal and corporate status on registered trade unions. It is applicable to unions of workers as well as associations of employers. It extends to the whole of India by way of a central legislation but is administered and enforced by the state governments.

Its chief provisions enable the definition of trade unions, registration of a trade union by seven or nine workers of an establishing on applying with a copy of the rules of the union, the name and address, and the list of office bearers. It also covers the cancellation and dissolution of trade unions and the obligations and the rights of registered trade unions.

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  • ashwinee

    According to my knowledge, the employees eligible for p.f. are those whose wages are less than 6,500.



  • Abhay Panchakshari

    I have gone through above information on Bonus and Gratuity and wish to mention that ;

    1. Bonus Act is applicable to all respective employees whoes wages/ salaries are not exceeding to Rs.10000/- pm.(instead of Rs.2500/-) and calculation base is Rs.3500/-
    2. Gratuity is applicable to all employees irrespective of salary or status and becomes payable on completion of 5 years, except in case of death or disablement. Maximum Gratuity payable is Rs. 10 Lacs and it is Tax free.

  • anil

    Very good gor hr person

  • anil

    according my knowledge payment for bonus wages not exceeding Rs. 3500/ per month

  • dear sir(s),

    can you please suggest me the employee who has resigned from service after 7 years and drawing present salary of 9000 basic+allowance= 22000/-, my question is “is he ealigible for leave encashment & gratuity”, if yes can you please provide me any rule.

  • Adiga

    Dear Sir,

    Leagal HR compliance posted on 1 May 2010 needs to be updated, because all the information given here is not updated from last 5-6 years.

  • Nisar

    Information is not updated. Please update & then post it.
    It misguides to beginners.

  • VimalaNair

    Dear sir.

    legal HR compliance ,need break up of minimum wages.

  • nisar

    Dear Concerned/Moderator,

    Please understand back dated information misguides beginners.
    It may land up in big failure.


    Regret & Thanks

  • Sawantdarshana

    there are many other laws also that need compliance and cannot be neglected such as Model standing orders, some state laws such as Bombay labour welfare fund act, maharashtra minimum house rent allowance act, maharashtra mathadi and hamal and other manual workers (regulation of employment and welfare) act, maharashtra private security guards act, bombay shops and establishments act, other central acts such as contract labour regulation and abolitin act, maternity benefit act, etc.

  • Manoj

    Dear sir
    Legal HR Compliance posted by u is not updated
    so please update it on priority basis.

  • Prashantwarke

    I would like to appreciate the updated & precise information u have posted about  bonus & gratuity Acts

  • Pallavi7126

    Dear Concern,
    It’s true that Legal HR Compliance should update us with the amendments made in various Acts accordingly, such as; maximum payment in Gratuity Act is now 10 Lakhs instead of 3.5 Lakhs, also in ESI Act, the eligibility range has been increased from Gross Salary of  Rs.10000/-pm to 15000/-pm as per my knowledge. So kindly update the posts according to amendments made in various acts so that to make  regular readers of these posts more appropriate,  accurate and updated.

  • Narinder kumar sharma

    Hi, As i am aware the upper limit for coverage under pf act is 6500/-not 3500 please clarify to avoid any  contradiction in compliance. N K SHARMA

  • Nksharma

    Hi,As Iknow the eligibility for coverage under pf act is upto 6500 not 3500. to avoid contradictions at the time of compliance, pl. clarify.SHARMA N K